Media Statement
Financial Statements of the Government of New Zealand for the Nine Months Ended 31 March 2012

8 May 2012

Fergus Welsh
Chief Financial Officer
The Treasury

The Financial Statements of the Government of New Zealand for the Nine Months Ended 31 March 2012 were released by the Treasury today, the last set of Crown fiscal data compiled prior to the finalisation of the 2012 Budget Economic and Fiscal Update.

The monthly financial statements are compared against monthly forecast tracks based on the 2011 Pre-election Economic and Fiscal Update (PREFU) published on 25 October 2011.

The key results to 31 March were:

Core Crown tax revenue was $1.57 billion (3.8%) lower than forecast at PREFU with the gap in revenue having widened significantly in the month of March.  The Treasury’s assessment is that this gap will narrow by approximately $700 million before the end of the financial year because:

1. While the economy was generally weaker than expected to 31 March, stronger performance by some corporate taxpayers has also been observed during the reporting period.  Consequently, a boost to tax revenue is expected to make up approximately $400 million of lost ground in the final quarter of the financial year, and
2. The year-to-date March results include about $300 million of timing differences ($200 million in GST and $100 million in corporate tax) that are mostly expected to reverse before 30 June.  

The three main revenue tax-types continued to be below forecast.  The specific drivers were:

• Corporate tax was $659 million below forecast in the period and the Treasury anticipates a significant portion of this variance should clear by year end.
• GST was $569 million below forecast mainly due to earthquake-related insurance refunds being above forecast, although the Treasury anticipates a temporary component of approximately $200 million of this will reverse before the end of the fiscal year.
• Source deductions were $236 million below forecast as the labour market and employment and wage growth have been weaker than forecast in the October 2011 PREFU.

Offsetting the tax revenue result, core Crown expenditure was $1.75 billion (3.3%) lower than forecast. As reported last month, much of this difference was linked to associated revenue variances, or was primarily the result of delays in expenditure.

The operating balance before gains and losses (OBEGAL) deficit for the nine months to 31 March was $800 million higher than forecast at $6.13 billion.  With lower-than-forecast core Crown expenditure offsetting all but $100 million of the shortfall in core Crown revenue, the remainder of the deficit variance was primarily due to an increase in estimated earthquake costs, net of reinsurance, of approximately $500 million, much of which related to the 23 December 2011 earthquake. 

The residual cash deficit and net debt positions were respectively $410 million and $544 million lower than expected last October.  With expenditure and revenue having had a similar impact on the Crown’s cash position, the variances were largely attributable to delays in capital spending. 

At 31 March, net debt stood at $50.06 billion (24.5% of GDP) and gross debt stood at $75.93 billion (37.1% of GDP).

1 Using GDP for the year ended 31 December 2011 of $204,503 million (Source: Statistics New Zealand)
2 Using forecast GDP for the year ended 30 June 2012 of $211,773 million (Source: Treasury)
3 Gross sovereign-issued debt excluding settlement cash and Reserve Bank bills
4 Net core Crown debt excluding student loans and other advances

ENDS